Electrical Machinery


 

OVERVIEW

Electrical equipment industry broadly comprises of two segments: Generation Equipment (boilers, turbines, generators) and transmission & distribution (T&D) and allied equipment like transformers, cables, transmission lines, switchgears, capacitors, energy meters, instrument transformers, etc. The T&D equipment sector, dominates the sector making up for 85% of the industry whereas generation equipment sector accounts for the rest 15%. In 2016-17, the size of Indian Electrical Equipment Industry exceeded US$ 25 billion. The sector contributes about 8% to manufacturing sector in terms of value, and 1.5% to the overall GDP. For the period April-December 2016-17, electrical and industrial electronics industry witnessed 4% growth rate. Within the sector, high output growth sub sectors are Power Generation Systems and Cables, having industry size worth US$ 6.92 billion and US$ 6.34 billion. Estimated market value is expected to reach US$ 100 billion by 2022.

The subsector of heavy industry provides direct employment to 0.5 million persons, indirect to 1 million, and over 5 million across the entire value chain. Additionally, India has state of the art technology that is at par with the global standards. Making electricity accessible has been the key concern, and with various initiatives taken, India has managed to scale itself up to 26th position in terms of electricity accessibility, from 99th in 2014. Alongside, transmission lines witnessed a 26 % increase from 2, 91,336 circuit kilometres (ckm) in March 14 to 3,66,634 ckm in March 17.

Investments in research and development in the electrical machinery industry are amongst the largest in India’s corporate sector. Capacity creation in sectors such as infrastructure, power, mining, oil and gas, refinery, steel, automotive and consumer durables are driving demand in the engineering sector. Rapid increases in infrastructure investment and industrial production will fuel further growth. With a robust supply chain, the sector has a diversified, matured and strong manufacturing base.

 

In 2016-17, the size of Indian Electrical Equipment Industry exceeded US$ 25 billion. In FY17, 5,743 ckm of transmission lines have been commissioned, accounting for 24.6% of the annual target of commissioning 23,384 ckm of transmission lines. Increase in the transformation capacity is estimated at 16,635 MVA in FY17, constituting 36.8% of the target of 45,188 set for 2016-17. The Generation Equipment market is expected to expand at a CAGR of 24.6 per cent over FY15–22.

Boilers & parts and electrical wires and cables were the primary drivers of the increase in exports Indian manufacturers with capacity and advanced technology in industry export a wide array of equipment, including transformers and cables. For the year 2016-17, exports stood at approximately US$ 6 billion.

Major export markets for this sector are United States of America, United Arab Emirates, Germany and United Kingdom. India is a major exporter of Switchgear and Control gear, Transformers & Parts, Industrial Electronics, Cables, Transmission Line Towers, Conductors, Rotating Machines (Motors, AC Generators, and Generating Sets) & Parts.

The government has delicensed the sector and100% FDI is allowed under the automatic route in the electrical machinery sector, subject to all applicable regulations and laws.

Investment opportunities include generation machinery like boilers, turbines and generators, transmission machinery and distribution machinery. To make India the country of choice for the production of electrical equipment and reach an output of US$ 100 billion by balancing exports and imports, areas like technology and R&D, the lowering of customs duties on a range of equipment, the setting up of the Electrical Equipment Skill Development Council (EESDC), the establishment of electrical equipment industry clusters; the enhancement of product-testing infrastructure in the country; an increase of shares in the export market and financial support should be focused on. Indian manufacturers are becoming more competitive with respect to their product designs, manufacturing and testing facilities.

Indian Electrical Equipment Industry Mission Plan (2012-22), aims to make India, a country for production of electrical equipment achieving an output of US$ 100 billion, and thus balancing the present trade deficit of the sector. By 2022, domestic demand for generation equipment and transmission & distribution sector is expected to be in the range of US$ 25-30 billion and US$ 70-75 billion respectively. Market-oriented reforms, such as the target of ‘Power for All’ plans to add 93 GW during 2017-2022, will further generate huge demand for power transmission & distribution equipment. Incentives for capacity addition in power generation will increase the demand for electrical machinery.

 


 

SELECT GOVERNMENT INCENTIVES

The government plans to set up the Electrical Equipment Skill Development Council (EESDC) which would focus on identifying critical manufacturing skills required for the electrical machinery industry. Some additional incentives include -

  • The electrical machinery industry has been delicensed. This has facilitated the entry of global majors into the electrical machinery industry in India.
  • A weighted tax deduction of 200% under Section 35 (2AB) of the Income Tax Act for both capital and revenue expenditure incurred on scientific research and development. (Expenditure on land and buildings are not eligible for deduction).
  • Apart from the above, each state in India offers additional incentives for industrial projects. Incentives are in areas like subsidized land cost, relaxation in stamp duty, exemption on the sale/lease of land, power tariff incentives, a concessional rate of interest on loans, investment subsidies/tax incentives, backward areas subsidies, special incentive packages for mega projects, etc.
  • The government has introduced the Export promotion capital goods scheme, Duty remission scheme, Focus Product scheme, special focus product scheme and also the focus market scheme for export promotion and growth.
  • Steps taken for Skill Development, such as setting up of EESDC (Electrical Equipment Skill Development Council) would help bridging the skill gap required for critical manufacturing, with a clear objective of enhancing exports.
  • The Government has approved 15 SEZ’s for the engineering sector, and electrical machinery is a part of the sector. Further, development of Delhi–Mumbai Industrial sector is expected to provide a big boost to the Engineering and hence electrical equipment sector.

 

SELECT EXPORT MARKET REGULATIONS

The government of UK has prescribed regulations for traders who import and export electronics goods and technologies in and out of the country. It also explains the trading opportunities for importers and exporters, together with licensing and environmental and safety requirements. Please check this link for further details

https://www.gov.uk/guidance/importing-and-exporting-electronic-goods

EU has essential requirements that products must meet when they are put on the market. Such technical specifications vary depending on the type of products considered. Please check this link for further details

http://trade.ec.europa.eu/tradehelp/machinery-and-technical-products